Summary
In Fuentes, the evidence established that the fair market value of the real property awarded to Zaragoza was $3.3 million.
Summary of this case from In re Marriage of MizeOpinion
NO. 01-16-00251-CV
05-26-2016
MIGUEL ZARAGOZA FUENTES, Appellant v. EVANGELINA LOPEZ GUZMAN ZARAGOZA, Appellee
On Appeal from the 245th District Court Harris County, Texas
Trial Court Case No. 2014-30215
MEMORANDUM ORDER
Pursuant to Texas Rule of Appellate Procedure 24.4(a), appellant Miguel Zaragoza Fuentes requests that this Court review and overturn the trial court's order requiring that he post a $278.3 million bond to supersede execution on the trial court's Final Decree of Divorce. Appellant requests that the bond amount be reduced to an amount no greater than $25 million. We grant the motion and decrease the amount of the bond required to supersede the judgment to $25 million. We vacate the temporary stay order that we issued on March 30, 2016.
BACKGROUND
In December 2015, the trial court signed a Final Decree of Divorce between Miguel Fuentes and Evangelina Lopez Guzman Zaragoza. In its decree, the trial court awarded Evangelina $537,680,823 in cash, plus real and personal property including "[a]ll shares and all interest of any kind in and to" a number of business entities that the trial court found to be alter egos of her husband, Miguel Fuentes. Miguel and other parties to the divorce proceeding have filed notices of appeal from the Final Decree of Divorce, and the appeal remains pending in our court.
In March 2016, the trial court ordered that "the total and cumulative security to super[s]ede the judgment of this Court signed on December 21, 2015 is $278,300,000.00." The court delineated the amount as consisting of (1) $25 million to secure the $537,680,823 money judgment, (2) $3.3 million to secure interests in real property, and (3) $250 million to secure interests in "personalty," described mainly as equity shares in certain business entities. We granted Miguel's request for a temporary stay of the trial court's order and execution on the judgment pending our decision on the motion to review the amount of security. See TEX. R. APP. P. 24.4(c).
DISCUSSION
Under Texas Rule of Appellate Procedure 24.2 and Texas Civil Practices and Remedies Code Section 52.006, a judgment debtor may supersede the execution of a judgment by filing sufficient security. See TEX. R. APP. P. 24.2; TEX. CIV. PRAC. & REM. CODE ANN. § 52.006 (West 2015). Texas Rule of Appellate Procedure 24.4 authorizes an appellate court to engage in a review of the trial court's determination of the security required to supersede a judgment while it is on appeal. See TEX. R. APP. P. 24.4. On the motion of a party, we may review: (1) the sufficiency or excessiveness of the amount of security, (2) the sureties on a bond, (3) the type of security, (4) the determination whether to permit suspension of enforcement, and (5) the trial court's exercise of discretion in ordering the amount and type of security. See TEX. R. APP. P. 24.4(a). We may require that the amount of a bond be increased or decreased or that another bond be provided and approved by the trial court clerk. See TEX. R. APP. P. 24.4(d). We may also remand the proceedings to the trial court for an evidentiary hearing and entry of findings of fact. Id.
I. Standard of Review
A court of appeals reviews a trial court's ruling regarding post-judgment security under an abuse-of-discretion standard. See In re Longview Energy Co., 464 S.W.3d 353, 358 (Tex. 2015) (observing that the modern supersedeas statute and rules replaced "the simple rigidity" of earlier versions, "with trial court discretion reviewable on appeal"); Isern v. Ninth Court of Appeals, 925 S.W.2d 604, 606 (Tex. 1996); Ramco Oil & Gas Ltd. v. Anglo Dutch (Tenge) L.L.C., 171 S.W.3d 905, 909-10 (Tex. App.—Houston [14th Dist.] 2005, order). A trial court abuses its discretion if the evidence is legally or factually insufficient to support its findings. See In re Smith, 192 S.W.3d 564, 570 (Tex. 2006); Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998); Ramco, 171 S.W.3d at 910. If the trial court's ruling turns on a question of law—such as the interpretation of the supersedeas statutes and rules—our review is de novo because a trial court has no "discretion" in determining what the law is or in applying the law to the facts. Shook v Walden, 304 S.W.3d 910, 916-17 (Tex. App.—Austin 2010, order), disapproved of on other grounds by In re Corral-Lerma, 451 S.W.3d 385 (Tex. 2015); Ramco, 171 S.W.3d at 910; see Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992).
II. Applicable Law
The amount of bond that the trial court can set to supersede a judgment is governed by Section 52.006 of the Texas Civil Practices and Remedies Code and Rule 24.2 of the Texas Rules of Appellate Procedure. Section 52.006 of the Texas Civil Practices and Remedies Code provides, in relevant part, as follows:
a. Subject to Subsection (b), when a judgment is for money, the amount of security must equal the sum of:
(1) the amount of compensatory damages awarded in the judgment;
(2) interest for the estimated duration of the appeal; and
(3) costs awarded in the judgment.
b. Notwithstanding any other law or rule of court, when a judgment is for money, the amount of security must not exceed the lesser of:
TEX. CIV. PRAC. & REM. CODE ANN. § 52.006(a), (b). As a corollary to Section 52.006, Texas Rule of Appellate Procedure 24.2(a) provides:(1) 50 percent of the judgment debtor's net worth; or
(2) $25 million.
Types of Judgment
(1) For Recovery of Money. When the judgment is for money, the amount of the bond, deposit, or security must equal the sum of compensatory damages awarded in the judgment, interest for the estimated duration of the appeal, and costs awarded in the judgment. But the amount must not exceed the lesser of:
(A) 50 percent of the judgment debtor's current net worth; or
(B) 25 million dollars.
(2) For Recovery of Property. When the judgment is for the recovery of an interest in real or personal property, the trial court will determine the type of security that the judgment debtor must post. The amount of that security must be at least:
(A) the value of the property interest's rent or revenue, if the property interest is real; or
(B) the value of the property interest on the date when the court rendered judgment, if the property interest is personal.
TEX. R. APP. P. 24.2(a)(1)-(3).(3) Other Judgment. When the judgment is for something other than money or an interest in property, the trial court must set the amount and type of security that the judgment debtor must post. The security must adequately protect the judgment creditor against loss or damage that the appeal might cause. But the trial court may decline to permit the judgment to be superseded if the judgment creditor posts security ordered by the trial court in an amount and type that will secure the judgment debtor against any loss or damage caused by the relief granted the judgment creditor if an appellate court determines, on final disposition, that that relief was improper.
Section 52.005 provides that "to the extent this chapter conflicts with the Texas Rules of Appellate Procedure, this chapter controls." TEX. CIV. PRAC. & REM. CODE ANN. § 52.005(a) (West 2015). Unlike Texas Rule of Appellate Procedure 24, Chapter 52 makes no separate provision for security for non-monetary relief. But, under either rule, when a judgment is for money, the amount of security must not exceed $25 million. See id.
III. Analysis
Miguel does not challenge the trial court's $25 million bond amount to secure the $537,680,823 money judgment or argue that the money judgment is not an award of compensatory damages as contemplated by Rule 24 and Chapter 52. Rather, Miguel contends that $25 million is the maximum bond amount authorized to secure a judgment when the judgment is "a judgment for money." Evangelina responds that the statutory $25 million cap applies to security for money judgments but does not limit the security amount that the trial court can require for the real and personal property portions of its judgment. Miguel replies that the amounts that the trial court ordered to be posted relating to property were assigned as "simply a proxy for monetary value." He further observes that the Texas Civil Practice and Remedies Code, which controls and informs Rule 24, provides a $25 million cap on the security of the bond for any judgment "for money," regardless of whether the judgment is for money alone or for money and property. Because the judgment in this case is "for money," in addition to real and personal property, Miguel argues that the $25 million cap on a bond amount applies.
A. Security for Personal Property
The trial court's order reflects that the trial court based its $250 million bond amount for personal property on Miguel's admission "by and through his attorney of record" that Miguel's net worth exceeds $1 billion:
The Court finds that on pages 11-14 of the Final Decree of Divorce signed on December 21, 2015, Ms. Zaragoza was awarded all shares and interest of any kind to numerous business entities. The Court finds pursuant to the statutes of the State of Texas, these interests are personal property.The evidence used to set the security amount is Miguel's counsel's statement that Miguel's net worth exceeds $1 billion, contained in a July 7, 2014 verified motion for continuance of a hearing on Evangelina's request for appointment of a receiver for companies at issue in the divorce. The applicable portion of the motion states as follows:
The Court has previously found that the record contains evidence that Mr. Zaragoza's net worth exceeds 1 billion dollars by his own admission by and through his attorney of record.
Therefore, IT IS ORDERED in the interest of justice that the amount of security for the judgment for the recovery of an interest in personal property is $250,000,000.00.
Among the requests made by [Evangelina] in her motion for temporary orders is the appointment of a receiver. The assets under the control of [Miguel] have a value in excess of one billion dollars ($1,000,000,000
USD), and include dozens of companies based in many different countries.This statement does not demonstrate a valuation of $250,000,000 in personal property. See Longview, 464 S.W.3d at 360 (security not required for award lacking "explanation for what the figure represents" and concluding that amount could not be determined to be compensatory "when it cannot be explained").
There is no evidence in the order or the final judgment of the value of the specific personal property awarded to Evangelina. Rather, the order sets that amount by assuming that the personal property awarded to Evangelina had a value of half of Miguel's proclaimed net worth. In so doing, the trial court monetized the property interests contained in the judgment, using personal property as a proxy for money. Because the bond amount for "personal property" was (1) a proxy for a monetary award; (2) not traceable to securing particular non-monetary assets; and (3) results in a bond exceeding $25 million even though the judgment on appeal is "for money" in addition to real and personal property, we hold that the trial court erred in requiring a bond for personal property in the amount of $250,000,000.
B. Security for Real Property
In setting the amount to secure Evangelina's interests in real property at $3.3 million, the trial court's order provides:
The Court finds that on pages 10 and 11 of the Final Decree of Divorce signed on December 21, 2015 contains a judgment for the recovery of an interest in real or personal property.
Pursuant to Section 24.2 of the Texas Rules of Appellate Procedure, when the judgment is for the recovery of an interest in real or personal property, the trial court will determine the type of security that the judgment debtor must post. The amount of that security must be at least:
(A) The value of the property interest's rent or revenue, if the property interest is real; or
(B) The value of the property interest on the date when the Court rendered judgment, if the property interest is personal.
The Court finds that the uncontroverted sworn Inventory & Appraisement of Ms. Zaragoza admitted at trial indicated a Fair Market Value of items W-1 (a-g) at a cumulative value of at least $3,300,000.00.The trial court's order based its $3.3 million security amount on the appraisal district values assigned to the properties. Rule 24.2 requires that the amount of security for real property be at least the value of the property interest's rent or revenue. See TEX. R. APP. P. 24.2(a)(2)(A).
Therefore, IT IS ORDERED the amount of security for the judgment for the recovery of an interest in real property is $3,300,000.00.
Evangelina observes that the required security for real property set forth in Rule 24 is not capped by $25 million. Although Rule 24 separates security for money judgments from judgments for real and personal property, Chapter 52 does not. The chapter subjects any "judgment for money" to the $25 million cap for a bond amount, without differentiating between judgments for money only and judgments for money and property. See TEX. CIV. PRAC. & REM. CODE ANN. § 52.006(b). Given that the statute makes no distinction, we decline to separate the two kinds of relief, contained in one final judgment, for purposes of applying the cap.
Evangelina argues that Miguel has committed fraud on the community estate and has been dissipating community assets, and thus a larger bond is necessary to deter that conduct. In addressing that concern, Section 52.006 expressly notes that "[n]othing in this section prevents a trial court from enjoining the judgment debtor from dissipating or transferring assets to avoid satisfaction of the judgment" outside the normal course of business. TEX. CIV. PRAC. & REM. CODE ANN. § 52.006(e).
Neither the appraisal district values nor any other evidence in the record provides a basis for determining the rent or revenue of Evangelina's interests in real property. Without any evidence of the real property's rent or revenue value, the trial court could not have determined either (1) the minimum amount necessary to sufficiently secure Evangelina's real property interests or (2) whether any amounts over the real property's rent or revenue value were excessive given the other methods for securing a judgment lien against real property, including an injunction against dissipating assets or a lien on the property.
Finally, the judgment contains an award "for money," which places the judgment under the $25 million overall cap contained in Chapter 52. Accordingly, we hold that the trial court erred in requiring an additional $3.3 million to secure the award of real property contained in the final judgment.
CONCLUSION
We grant the motion for a reduction of the supersedeas bond. We order that the supresedeas bond be modified to reduce the bond amount required to $25 million. We lift our order granting a stay of proceedings upon entry of the modified bond by the district clerk.
Jane Bland
Justice Panel consists of Chief Justice Radack and Justices Higley and Bland. Publish.